Real Estate

Buy Retirement Home now or Wait?

  • Last Updated:
  • Oct 15th, 2019 10:14 am
[OP]
Deal Addict
Jan 5, 2008
1195 posts
194 upvotes

Buy Retirement Home now or Wait?

Recently paid off Mortgage and was thinking it may be a good idea to purchase second home now since real estate savings could be $$ more than investing ? Will be retiring in 4-5 years so if real estate prices increase even 3% per year that is 12-15% over 4-5 yrs.

Purchase price for new home now 300-350K .... price in 4-5 yrs 360K-402.5K.... savings approx 60K less interest on 300K mortgage @ 2.5% (30K-37.5K) = 23.5-30K

That that sound right?

If I put the mortgage payment aside would have about 70K in 5 yrs and the mortgage remaining after 5 yrs would be appox 260K

Looks to be close to a wash either way but if real estate values keep rising at current rates over 4-5 yrs be way ahead? The area I am considering had a 10% increase 4th quarter 2018 compared to 2017... so if that continued that 300K home would be 485K

Thoughts?
11 replies
Jr. Member
User avatar
Aug 11, 2019
131 posts
156 upvotes
Toronto
Yes. You have the flexibility of time to look for your retirement residence now, so you won’t be as much of a panic when that fortunate time comes.

The only question is, what will you do with the retirement residence during the 4-5 years you are not occupying it? Renting it out? If you are renting out, keep a slush fund for rainy days and crazy tenants.

Best of luck!
Real Estate Agent
GTA & Surrounding Areas
[OP]
Deal Addict
Jan 5, 2008
1195 posts
194 upvotes
Yeah.. not sure if I would rent it out.. may use as weekend getaway and use the time to do some renovations at my own speed :-)

My thought is to try and have as much cash on hand when I retire.. current home is valued at 675K... so likely will be 750K-800K in 4-5 yrs... my goal is to have as close to 500K after sale of primary residence and paying off retirement home... will be close but attainable for sure...
Sr. Member
Jan 1, 2017
869 posts
672 upvotes
What city are you in and where do you want to buy a retirement home? Would you be buying a condo, tow townhouse, detached (bungalow or multi floors?)? How old would you be when you retire?
Sr. Member
Feb 19, 2019
601 posts
606 upvotes
Stouffville ON
Since the retirement funding seems to be one of the main goal having a second home sit empty for 5 years doesn't seem like a very good idea at all, you have 5 years of paying utilities, property taxes, insurance, maintenance and mortgage interest, let's say it's 80K for the period of 5 years, the property is cashflow negative $2K per month, don't know if this is a lot for you or not but if having $500K is the goal you should rent this place, write off all expenses and be 80K richer by the time you are ready to move. The tenants (assuming you won't have tenants from hell) will pay for your expenses, your monthly cashflow would be much better and if the value of the property appreciates it will be even better. If you don't want to rent it out you are probably better off not buying from the financial point of view, the expenses will wipe out the potential gain, and the gain is far from guaranteed.
Full Time and Full Service Realtor
Jr. Member
User avatar
Jun 28, 2018
150 posts
206 upvotes
Aurora, Ontario
senasena wrote: Since the retirement funding seems to be one of the main goal having a second home sit empty for 5 years doesn't seem like a very good idea at all
If the government implements some sort of a "empty house" tax like they did in BC OP will be screwed.
Deal Fanatic
Dec 11, 2008
9891 posts
1444 upvotes
Is there a reason why you won't just wait until you retire and sell your current home to fund retirement home?

Is the prices increasing that fast in your retirement area vs current home?
Deal Guru
User avatar
Sep 14, 2003
10463 posts
341 upvotes
Mississauga
I think there's tax implications with this.

If you buy both homes now and eventually sell your principal residence, it will probably be considered your secondary residence upon sale and subject to capital gains tax.

Also, depending on where your house is located, it's not exactly a down time on the market. It's not like there's a fire sale right now.

Wait.
4chan melts your brain.
[OP]
Deal Addict
Jan 5, 2008
1195 posts
194 upvotes
ProductGuy wrote: What city are you in and where do you want to buy a retirement home? Would you be buying a condo, tow townhouse, detached (bungalow or multi floors?)? How old would you be when you retire?
Windsor/Kingsville/Leamington area. No condo..hoping for 60
[OP]
Deal Addict
Jan 5, 2008
1195 posts
194 upvotes
DarekP84312 wrote: If the government implements some sort of a "empty house" tax like they did in BC OP will be screwed.
Would not be empty year round.. would be using on weekends.. so basically would be a vacation home....not primary residence.
Deal Addict
Dec 4, 2016
1750 posts
801 upvotes
jblade44 wrote: Would not be empty year round.. would be using on weekends.. so basically would be a vacation home....not primary residence.
Actually that's exactly what the BC "speculation tax" is targeting. Politically it's quite convenient to tax vacation homes.
Newbie
Apr 20, 2016
17 posts
5 upvotes
I don't think that is correct, in only applies to non-residents.

Top